Conventional Wisdom's Errors Can Yield Profit Opportunities
Every year at this time I like to take the pulse of the conventional wisdom, my theory being that it's hard to make money by embracing a position that everyone already agrees with. I'm not really a contrarian, because often conventional wisdom turns out to be right, and you don't make money betting against the herd when you're wrong. But when the conventional wisdom involves predicting the future, opportunities may lurk.
This year there are two overwhelmingly popular predictions: that the dollar will continue to fall against other major currencies, and that long-term interest rates will rise.
Before I turn to the investment implications of these firm convictions, let's look at last year's conventional wisdom, and how those predictions turned out. This year's conventional wisdom -- a falling dollar and rising rates -- is the same as last year's. Last year's conventional wisdom turned out to be right, with a few caveats.
This may come as a surprise to those of you looking at long-term interest rates that are almost the same now as they were a year ago. Commentators have been noting that the conventional wisdom last year about rates was wrong. That's true if you look only at year-to-year comparisons.
But interest rates did rise sharply during the late spring and early summer, so much so that, after urging investors to avoid bonds in January, I signaled it was OK to get back in. The rally that ensued for the rest of the year took most economists by surprise, especially since short-term rates were indeed driven up by the Federal Reserve.
The dollar behaved in a similar, albeit inverse, fashion. While it had fallen about 30% compared with the euro by the end of the year, it rallied in the early part of the year. The time to buy foreign equities and bonds and reap the benefits of a falling dollar was in the spring.
A third prediction I noted last year was that tech stocks were overvalued. I didn't accept this conventional wisdom then, and overall I turned out to be correct, since the tech-weighted Nasdaq rose a healthy amount. But here, too, assessing the conventional wisdom isn't so simple, since many tech stocks did turn out to be overvalued. The two stocks I mentioned as being viewed as overvalued -- eBay and Nortel Networks (both stocks I own) -- turned in widely varying performances. EBay was one of the year's best performers, rising from $64 to nearly $118 at year's end (dropping to about $105 yesterday), while Nortel went from $6 to $3.47 ($3.48 yesterday).
At the moment I happen to agree that long-term interest rates will rise, which means investors should steer clear of long-term bonds. Junk bonds in particular seem overvalued. It is illogical that rates would stay low because of investor fears of a slowing economy and that junk bonds would continue to rally because of improving credit quality. Either long-term rates will rise, hurting junk bonds, or credit quality will decline, also hurting junk bonds. This strikes me as a no-win situation.
I also agree that the dollar is likely to decline further, though I suspect it won't fall as far or for as long as the conventional wisdom predicts. While the dollar rallied 4% against the euro during the first week of the year, it's hard to see a trend in one week.
I'm holding my investments in foreign securities, and am planning to add to my position in the India Fund, but I'm feeling more cautious. If the dollar falls much further, I'll begin to take some profits.
A curiosity this year is that there is so little conventional wisdom. Opinions vary widely on oil prices, pharmaceutical stocks and tech stocks. Generally I find that to be a healthy omen for the market, since it minimizes the possibility of shocks when the unconventional happens. The only other prediction I find troubling is that 2005 will be a good, if not spectacular, year, with returns in the 8% to 10% range. I've even seen forecasters asserting that the market will rise because it always rises in years ending with a "5." One of these years, that's going to prove spectacularly wrong. I just hope 2005 doesn't turn out to be the one.
这次多数人的预测还是对的吗？
每年的这个时候我都喜欢给大多数人都能接受的所谓常理或者共识号号脉，我的理论是抱著人人都同意的观点是很难赚到钱的。但我并不是逆向操作派，因为人们的普遍观点常常被证明是对的，而且如果你本身的想法错误，你并不会因为跟多数人意见相左就能获利。当涉及预测未来的时候，大多数人的意见里或许蕴藏著投资机会。
今年有两个预言非常盛行，一是美元兑其他主要货币将继续下跌；一是长期利率将上升。
不过，在分析这两个言之凿凿的预测对投资意味著什么之前，让我们先看看2004年人们普遍持有的预测是什么以及这些预测的结果。今年的预言之一──美元兑其他主要货币将继续下跌──去年也有，去年的预测基本上得到了验证。
但2004年年底长期利率与一年前相比基本没变化，这或许让一些人感到意外。评论家们指出，有关2004年利率走势的普遍预期是错误的。如果只比较上年同期的数据，结果的确如此。但2004年春末夏初时，利率的确一度上升，而且幅度之大以致于我也认为当时是重新介入债券的时候了，虽然之前1月份时我曾力劝投资者避免涉足债券。接下来的持续上升让大多数经济学家都感到意外，特别是在短期利率的确被联邦储备委员会(Federal Reserve)调高了之后。
2004年美元也出现了类似、但方向截然不同的走势。尽管截至年底美元兑欧元下跌了30%，但2004年年初时曾经上扬。买进外国股票和债券、坐享美元下跌之利的时机是当年的春季。
去年我注意到的第三个普遍预言是科技股被高估了。当时我并不接受这种普遍看法，结果证明我是对的，以科技股为主的那斯达克指数实现了可观的涨幅。但在这个问题上也能说明评价普遍观点的对错并不是件容易的事，因为当时也有不少的科技个股后来证明的确被高估了。
比如，我曾提到当时都被视为高估的两只股票eBay和北电网络(Nortel Networks)（这两只股票我都持有），但后来两只股票的走势迥异。Ebay成了2004年表现最好的股票之一，从64美元涨至年底的118美元（周四该股跌至105美元），而北电网络则从6美元跌至3.47美元（周四该股收于3.48美元）。
至于2005年，我认为长期利率会上升，这意味著投资者应规避长期债券。垃圾债券看来尤其被高估了。认为利率因投资者担心经济增长放慢而将维持在低位，以及垃圾债券将因信用质量改善而继续上扬都是不合逻辑的。无论是长期利率上升，还是信贷质量下降，垃圾债券都会备受压力，两种情况都不讨好。
我也同意美元2005年可能还会进一步下跌，虽然我估计其跌幅或者跌势持续的时间不会达到市场普遍预期的程度。今年第一周美元兑欧元回升了4%，但仅凭一周的情况难以判断未来的趋势。
我仍持有投资的外国证券，并计划增持在India Fund的头寸，但我还是谨慎多了。如果美元进一步下挫，我就会开始抛出部分外国证券，锁定盈利。
今年让人奇怪的是所谓的普遍共识少之又少。从油价到制药类股，再到科技股，在每个话题上人们的意见都非常分歧。
总体来说，我将此视为一个有益于市场健康的征兆，因为这会降低不寻常的变动发生时市场遭受意外冲击的程度。唯一的另外一个预言、也是我觉得比较棘手的预言是2005年即使不会大放异彩，也将是一个好收成的年头，回报率将达到8%-10%。我甚至还听到有预测人士说，因为今年的公元纪年尾数逢“5”，所以市场肯定会走高。以前就曾有尾数是“5”的年头情况极其糟糕的时候。我只希望2005年别像那年那么惨。
